Kentucky Law Journal

Volume 18 | Issue 2 Article 2

1930

Equity as a Concept of International Law(continued)Lester Bernhardt Orfield

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Recommended CitationOrfield, Lester Bernhardt (1930) "Equity as a Concept of International Law (continued)," Kentucky Law Journal: Vol. 18 : Iss. 2 ,Article 2.Available at: https://uknowledge.uky.edu/klj/vol18/iss2/2

EQUITY AS A CONCEPT OF INTERNATIONAL LAW*

B. EQuiTy AS INTFTPRE D in ARmiTRAL AwARDs

Beginning with the Jay Treaty of 1794 the United. Stateshas during the whole period of its history been drafting arbitralagreements in which equity is made a part of the materialapplicable law. In a number of cases arising under such agree-ments the precise meaning of the term has been brought in issue.The earliest case in which the question was raised seems to havebeen the Florida Bonds case decided by the British-AmericanClaims Commission under the Treaty of 1853.104 The claimof England to recover for debts contracted by the territorialgovernment of Florida was rejected. Thomas, the Americanagent, in his argument asked to what kind. of equity the Britishcounsel referred when he placed his claim "upon the principlesof equity, reason and public morals." He must be alluding toa "transcendental equity which belongs not to man to ad-minister." If it were a legal equity the claims should havebeen brought before the American courts. The claimants admitthat the courts of the United States have no jurisdiction. "Theequity, then demanded, is that which has heretofore been toosubtle for courts of justice, and the case is brought before thisCommission under the supposition that it is endowed with super-human power."

The Rio Grande cases decided in 1873 by the British-American Claims Commission is notable for the protest of Com-missioner Frasier against a broad interpretation of the term"equity".105 "The doctrine that this commission may by itsdecisions, disregard the law of nations, in deference to whateverundefined notions of 'equity and justice' the several membersof the commission may happen to entertain from time to time,is to me a very great surprise." Equity does not depend on theindividual conscience of the chancellor; " 'equity follows thelaw'--abides by it-not only obeys but maintains it, and admin-isters justice according to a system of known and established

* The first installment of this article appeared in the Novemberissue of the Kentucky Law Journal.

-eport of the British, American Claim Commission under Treatyof 1853, 246, 269.

"1'3Foreign Relations of 1873, Vol. 2, Hale's Report on British,American Claims Commission, pp. 246, 247.

EQui= AS A CONCEPT OF INTERNATiONAL LAW

principles sanctioned by precedent." The rules of internationallaw furnish the full measure of obligation in a given case, andascertain what equity is. The agent for Great Britain arguedthat the arbitration agreement vested the tribunal with an ex-traordinary discretion since only equity and justice are men-tioned as the juridical bases without any reference to inter-national law.10 6 The Jay Treaty gave more limited powersince international law was expressly laid down as a ground ofdecision. Irrespective of international law the claims must besatisfied if "justified in the conscientious judgment of the com-missioners by justice and equity." Equity should therefore re-fuse to follow the technical rule of prize law that probable causenot merely excuses, but in some cases justifies a capture. If,however, the rule of probable cause were to be adopted, thetribunal should work out its own doctrine of probable cause"unembarrassed by the special and technical rules of the prizecode." The tribunal rendered an award in favor of the Englishclaim, but the decision was meager in its reasoning and the tri-bunal appears to have assumed that it acted according to in-ternational law.

The Venezuelan Arbitration cases of 1903 contain some otthe most elaborate discussions of the meaning and applicationof equity. The compromis provided that judgment should be"on a basis of absolute equity, without regard to objections ofa technical nature or of the provisions of local legislation." Inthe Aroa Mines case, Umpire Plumley of the British-VenezuelanCommission adhered to the general principle of internationallaw that a state is not responsible for the wrongful acts of un-successful rebels committed against resident aliens.107 TheUmpire pointed out that the "course of commissions has rarelystrayed from equity and justice by a too close adherence totechnical objections.' 08 L In finding the law to govern the case,the tribunal must first look to its oath, and then to the terms ofthe arbitral agreement.-09 In case of conflict between the twothe former is the superior rule of action. Although inter-national law is not mentioned in the compromis "since it is a

- Ibid., 103, 104.21 Venezuelan Arbitrations of 1903; Report of Jack~son H. Ralston,

344. "bid., 380.-* Ibid., 385-6.

118 KENTuCKy LAW JouRNAL

part of the law of the land of both governments, and since it is

the only definitive rule between nations, it is the law of this

tribunal interwoven in every line, word, and syllable of the

protocols, defining their meaning and illuminating the text, re-

straining', impelling, and directing every act thereunder."

Plunley says: "The phrase 'absolute equity' used in the

protocols the umpire understands and interprets to mean equity

unrestrained by any artificial rules in its application to a given

case." 110 "International law is assumed to conform to justice

and to be inspired by the principles of equity." If, however, in-

ternational law is opposed to equity, or is inadequate or inapplic-

able, then the underlying principle of justice and equity enter

into play.11 1 But international law is to be applied as far as

possible, since it has stood the test of time and experience, and

a careless departure would result in entering upon uncharted

seas.The same issue of law was involved in the Sambiaggio case

before the Umpire Ralston of the Italian-Venezuelan Commis-

sion, and a similar result was reached.112 It was the Commis-

sion's duty "to apply equitably to the various cases submitted

the well established principles of international law." 113 The

Commission first dealt with the facts "from the standpoint of

abstract right," leaving the analysis of precedents and treaties

to later consideration. The Venezuelan government was not

liable for three equitable reasons: that the revolutionists were

not the agents of the government; that their acts were aimed at

the government, which should not be held liable for the acts of

its enemies seeking its very life; and that they were beyond the

control of the government. Equity will not gonsider political

expediency. 114 Hence the contention that a holding of no re-

sponsibility would encourage rebels to seize the property of

foreigners was rejected. The equitable rights of the injured

aliens were held td be inferior to the equitable rights of the

government not to be charged with wrongs it never committed:

a sort of balancing of equities. "In the view of the umpire, the

true interpi'etation of the protocol requires the present tribunal

n° Ebid., 386.=IbTid, 387.

Ibid., 666.I Tbid., 679-680.I*!-bid., 692.

118

EQu ry AS A CONCEPT OF INTRNA NAL LAW

disregarding technicalities, to apply equitably to the variouscases submitted to them the well-established principles of justice,not permitting sympathy for suffering to bring about a diregard

for law."In the Padron case the question of responsibility also came

before the Spanish-Venezuelan Commission, which permitted

the claimants to recover on the ground of equity, the umpireconceding that ordinarily there was no legal liability.115 Theeffect of the "absolute equity" proviso was to make necessary

the separate examination of each claim without its being allow-

able to lay down an abstract principle stated in general terms,which would simultaneously decide several claims." 6 In orderto establish that the commission was "created as a tribunal ofequity only," objections of a technical nature and provisions oflocal legislation were not to be considered. Umpire Gutierrez-Otero lays down the rule that the objection of a want of re-

sponsibility for the acts of unsuccessful revolutionists is atechnical one because it does not conform to equity. The viewof Merignhac to the effect that such a protocol leaves absolute

equity to the arbitrator is accepted as correct.117 Absoluteequity permitted the Commission to decide "without conform-ing to law, which is what essentially characterizes arbitra.

tors," 118 The protocol shows the desire of the parties to havethe case decided according t6 the principles of morality, andp'omotes recourse to arbitration since it broadens the scope ofarbitration and permits the decision of a greater variety of

cases.1- 0

-Ibid., 923.'5 bid., 929."nTh1, p. 927. The Umpire also cites the opinion of Lafayette:

"When it is according to their conscience, sentiments of equity, or theprinciples of natural law, that the arbitrators must render their sen-tence, they constitute a tribunal of equity; if, on the contrary, it isaccording to previously established principles of international law, wehave a court of justice." Calvo, InternatiOnal Law, III, 464, note 1.itelianee taso is put on the last clause of the recommendation by theInstitute of International LaW in its ruleg Of August, 1875, for use inarbitration agreements: "The arbitral tribunal shall judge accordingto the principles of international law1 ttnless the coftprornis imposesdifferent rules upon it or leaves its decision to the fr(e opinion of thearbitrators." Revue de Droit International, 1875, p. 281.

' Ibid., 928."Ibid., 929.

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The same commission laid down the latter rule of respon-sibility in the Mena case.1 20 The tribunal as one of equity hasabsolute liberty to hand down a decision "which is not againstgood conscience, inspired by a true estimation of absolute justice,and which permits finally, taking into consideration of all thecircumstances of the case, conceding equitably what is not amatter of obligation and cannot be demanded, and, in a word,proceeding, as arbitrators proceed, that is, without regard forlaw.Y

The Permanent Court of Arbitration at the Hague hadoccasion to pass on the meaning of equity in the Orinoco Steam-ship Company case.121 In revising the award of the UnitedStates-Venezuelan Commission which was empowered to de-cide according to "absolute equity," the court held that theprotocol "did not vest the arbitrators with discretionarypowers." The Venezuelan agent used as his "capital argu-ment" the contention that the phrase had conferred unlimiteddiscretion upon the Commission,' 22 Merignhac, Weiss, andFiore were cited as authorities. 23 The United States, on theother hand, did not quote publicists, but alleged the continuedpractice of the United States in using such language in arbitralagreements without its ever having been construed to give suchauthority. 124 The Court reversed the rules laid down in theaward appealed from, that absolute equity authorized the rejec-tion of a claim on the grounds of failure to resort to the localcourts, and of failure of the claimant assignee to notify thetransfer of his debt to the debtor, a proceeding required by thelocal law. The arbitral convention of 1903 and 1909 made thelocal jurisdiction incompatible with the arbitration. Want ofnotice to the debtor was excused on the ground that the rulerequiring it was merely a local one, and hence not required byabsolute equity, especially since the debtor had actual knowledgeof the cession.

One of the most important cases during the last decadediscussing the meaning of equity was the Norwegian ShippingClaims case against the United States in 1922.125 The award

-OlTbid., 931-932.2n Scott, Hague Court Reports, 232.

Venezuelan Argument, 65.Mdi(., 18, 30, 32.

"'United States Argument, 121, 218, 20.17 A. 3. 1. L., 362

EQUITY AS A CONCEPT OF INTERNATIONAL LAW

lays down a kind of principle of eminent domain in internationallaw when a state seizes the property of foreign citizens. Thecompromis provided for decision according to the "principlesof law and equity." As to the meaning of this phrase the tri-bunal said: "The majority of international lawyers seem toagree that these words are to be understood to mean generalprinciples of justice as distinguished from any particular systemof jurisdiction or the municipal law of any state." 126 Theycannot be understood "in the traditional sense in which thesewords are used in the Anglo-Saxon jurisprudence." Hence themunicipal law of the United States was not binding. It wouldnot be followed where it violated the principle of equity of theparties, or the principles of justice common to every civilizedcountry. The damages and interest appear to have been assessedon an equitable basis. "It has been somewhat difficult to fixthe real market value of some of these shipbuilding contracts.The value must be assessed ex aequo et bono." 127 As to interestthe tribunal asserts that it is competent to allow it "as part ofthe compensation ex aequo et bono, if the circumstances are con-sidered to justify it. ' 128 The award was accepted by theUnited States, but not without serious protest.129 SecretaryHughes in a letter to the Norwegian minister at Washington re-fused to accept what he termed the "apparent bases' of theaward as being expressive of international law or as binding theUnited States as a precedent.

The most extensive discussion of equity is to be found inthe recent Cayuga Indians ease decided by the British-AmericanClaims Commission.13 0 The United States was held liable on acontract in the form of a treaty made by the State of New Yorkwith the Cayuga Tribe of Indians, part of whom had migratedto Canada after the making of the treaty. The tribunal ex-pressly stated that the United States was not legally liable forsuch a debt, but was equitably liable because the Indians hadno international status and because of their dependent legalstatus. The tribunal also held the United States legally liableunder the Treaty of Ghent, so that the finding of equitable

Did., 384.ir bid., 393.

-Ibid, 395.Ibid, 287-289.

"*Report of Fred KT. 2tie~sen, 202-331, 307. Dean Roscoe Pound wasone of the three members deciding the case.

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liability was seemingly unnecessary. "There are cases inwhich-like the court of the land-these tribunals must findthe right and the law, in -general considerations of justice,equity, and right dealing guided by legal analogies and by thespirit and received principles of international law." 131 Equitydoes not involve compromise.13 2 The ex aequo et bono clauseof article 38 of the Statute of the Permanent Court is dis-tinguished in its purpose. That clause calls for a "degree ofcompromise" and not for principles of equity. EqUity involves"general and universally admitted principles of justice andright dealing, as against the harsh operation of strict doctrinesof legal personality-in an anomalous situation for which suchdoctrines were not desired and the harsh operation of the legalterminology of a covenant which the covenantees had no part inframing and no capacity to understand." As authority thetribunal relies on Merignhae, Lammoseh, Bulmerineq, and theopinion in the Norweigian Shipping Claims case.

In two other cases decided by the same tribunal, composed,however, of different members, a strict interpretation was placedon the phrase. In the Hardman case it was held that the UnitedStates was not liable for the destruction of the property ofaliens in time of war in the interest of the preservation of thehealth of military forces.133 An act of grace was, however,recommended. Both agents urged a limited interpretation ofthe word "equity."1 3 4 Hurst, the British agent, contended thatthe use of the word "and" instead of "or" to connect "inter-national law" with "equity" showed that equity was to be ap-plied only where there was no rule of international law.135

Clark, the American agent, argued that where there is no appli-cable rule of strict international law, the tribunal will apply thefollowing principles in the named order: (1) principles ofprivate international law; (2) maritime law; (3) "the funda-mental principles of the jurisprudence of the various systemsof law, particularly the common law (and, I include in thatterm the common law and equity as understood in the UnitedStates and Great Britain) and the principles of the civil law;"

Ibid., 320.'bid., 68.

7 A. J. . L , 687-706.Sbid., 687.

EQUITY As . CONCEPT OP INTE A.ONAL LAW

(4) the fundamental principles of law of the parties involved;(5) any positive principles of law of the defendant nation, and(6) any positive principle of law of the plaintiff nation.13 6

Equity has had a great looseness of usage and interpreta-tion by international tribunals.131 It is erroneous for them "toadminister abstract equity regardless of the law," and "to tryto conceive what was the abstract equity involved in any par-ticular case." The conception of equity of the individual arbi-trator in the case must not govern. The advancement of in-ternational arbitration would be impeded by such an interpre-tation. "If nations come to feel in'submitting differences to thearbitrators that the decision will probably not be according tothe law involved but will be according to the ideas of the tri-bunal, as to abstract right and justice, then I say to you arbi-tration cannot live. No nation would know where an arbitraltribunal might go in a controversy to which it was a party. 38

In the case of Eastern Extension, Australasia and ChinaTelegraph Company, Ltd., the tribunal held that a belligerentnation cutting cables belonging to neutrals and connectingenemy and neutral Territories was under no equitable obligationto make compensation.139 Equity must give way in the face ofa treaty or a rule of international law.' 40 "If the strict appli-cation of a treaty or of a specific rule of international law con-duce to a decision, which, however justified from a strictly legalpoint of view, will result in hardship, unjustified, having regardto the special circumstances of the case, then it is the duty of thetribunal to do their best to avoid such a result, so far as maybe possible, by recommending some course of action by way ofgrace on the part of the respondent government." The brief ofcounsel for the United States cites the Rio Grande, Orinoco, andSantiaggio cases as controlling in the definition of equity.1 4 '

Nielson, agent for the United States, asserts that equity as aground of decision might well be eliminated, from arbitral com-iromis,. but that it has come into a conventional use.' 42 He

-Ibid., 693.I"bid., 695.Ilba., 706.Report of Fred Nielsen, 73.Md IbtZ., 79.T h!btd., 57-59.I /bi d., 60.

123

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thinks that it "has seldom furnished excuse for an abuse ofjudicial discretion, and that the interpretation which has gen-erally been put upon it is that cases are to be decided with im-partial, even-handled justice-by the application of law." Hewould confine the term to matters specifically designated as"equities" or "equitable" in the compromis, to the assessmentof damages, and to claims to lands where there is no domesticlaw.143 The British agent argued for a wider use of the termon the ground that international law had not yet reached thestage of development where all pecuniary claims were regulatedby positive rules of law.144 The tribunal must therefore havethe power to make awards based on justice in certain cases eventhough no positive rules of international law exist. 145

Summarizing the results of the awards of arbitral tri-bunals, one must conclude that arbitrators have been inclinedto adopt a narrower concept of equity than have the publicists.International judges have shown a tendency to identify equitywith analogy, as something to be resorted to as a mode of fillingthe gaps in international law. The recommendation of acts ofgrace and the function of amiable composition have been dis-tinguished from the application of equity. Judges have seldomridden rough-shod over well-established rules of internationallaw. Decisions according to equity have been decisions accord-ing to international law, and there has been no addition to sub-stantive international law. It seems wholly unlikely that therewill grow up any body of "equity" apart from internationallaw. A concise review of the awards plainly demonstrates this.In the Venezuelan cases of 1903, technical rules of local legis-lation were rejected. But local rules are not ex proprio vigore

I'bid., 61-62.- Ibid., 68.

"I Other cases discussing the meaning of equity are: Guastini,Venezuelan Arbitrations of 1903; Report of Jackson H. Ralston, 730;Kummerow, 526; Turnbull, Manoa Co., Ltd., and Orinoco Co., Ltd., 244;Gentini, 720; Davis, 402; Mazzei, 693; Brignone, 710; Hreny, Morris'Report on United States and Venezuelan Claims Commisison, 97; Boul-ton, Bliss and Dallett, 101; Barberie (also known as Cadiz) 4 Moore,History and Digest of International Arbitrations, 4200, 4203; Landreau,6 A. J. I. L. 1002; Russian Indemnity, Scott Hague Court Reports, 297;Island of Timor, 354; Pious Fund, 48, 53; Venezuelan Preference, TheVenezuelan Arbitration Before the Hague Tribunal: Report Win. L.Penfield; Perche, French, American Claims Commission (BoutwellsReport), 41; Lebret, 194; McCalmont, Treaves and Co., Report of theBritish-American Claims Comminssion under Treaty of 1853, 341; Lespes,2 Moore, International Arbitrations, 1300, note 2.

EQUITY AS A CONCEPT OF INTERNATIONAL LAW

binding in tribunals applying strict international law. TheAroa Mines and Sambiaggio cases denied the liability of a gov-ernment for the acts of unsuccessful revolutionists in the absenceof a showing of a lack of due diligence by the government.This is the ordinary rule of international law. In the Padronand Mena cases the Spanish-Venezuelan Commission assertedliability on the ground of equity. When it is borne in mind,however, that the better constituted commissions found theother way, and further that the rules of responsibility are notfully agreed upon at international law, the result is not particu-larly anomalous. In the Cayuga Indians case the issue of theliability of the central government on the contracts of a divisionor state of the nation was involved. The tribunal expresslystated that there was no legal liability but held that the UnitedStates was equitably liable. The result is not especially inde-fensible from the standpoint of international law, as the respon-sibility in this type of cases is also somewhat unsettled, andthere are several precedents of central governments having beenheld liable under not wholly dissimilar circumstances. Therewas perhaps a gap in the law which equity might properly :fllby resort to analogies, which in this case would not be difficultto find. In the Florida Bonds case the English agent assertedthat the United States was equitably liable for debts contractedby the territorial government of Florida. Although the arbitralagreement provided for application of law and equity, theclaim was rejected. Thus it seems that the doctrine of responsi-bility of a government has not been greatly strethhed by equity.

Although the tribunal accepted the liberal interpretation ofthe word "equity" in the Norwegian Shipping Claims case, nounusual doctrines were laid down. The United States was heldliable for the seizure by the government of Norweigian ships forwar use. But well recognized rules of international law re-quire compensation for such acts. The damages awarded mayhave been excessive. It is not clear from anything the Courtsaid in its opinion, however, that any positive principles qf in-ternational law as to damages were violated. The subject ofdamages seems at present to be a controverted one. In theHardman and the Eastern Extension, Australasia and ChinaTelegraph Company, Ltd., cases the British-American Tribunalseems to have adhered to a strict application of international

K]NTUPIXY IJAW JOUNAL

law, so that the award in the Cayuga Indians case is quitefully counterbalanced. In the former case the United Stateswas held not liable for the destruction of the property of aliensin time of war with the object of maintaining the health of itsmilitary forces. Yet an act of grace was recommended. In thelatter case the tribunal held that a belligerent cutting cablesbelonging to neutrals and connecting enemy and neutral terri-tories was under no equitable obligation to make compensation.The conclusion seems inevitable that tribunals authorized toapply equity have adhered rather strictly to rules of inter-national law, and that when they have gone beyond its prin-ciples, the departures have not generally been extensive in scope.

C. CONCLUSION AS TO MEAN'IING OF EQUITY.The views of the leading publicists and the definitions as

found in the leading awards have been set forth. It is now per-haps possible to frame a definition of equity as used in inter-national law, having especially in view compromis which makeequity a ground of decision or associate it with internationallaw as legal bases. At the outset it is apparent that it is notidentical with the equity of the Anglo-American judicial system.Nor is it a developed code of law, apart from the rules of in-ternational law. It is not an aggregate of substantive and pro-cedural rules., It is not limited to any one field of law, norbased on historical accident. It is not applied by a separate setof tribunals, nor is it generally applied consciously by theregular international judicial bodies apart from internationallaw. It is improper to speak of arbitration commissions as beingcourts of equity, since as has been seen they apply internationallaw to the same extent as courts of international justice. Noris equity identical with principles of private law.

Equity is not the subjective ethical views of the individualarbitrator. The arbitrator does not examine his individualconscience to see how he would decide a case apart from rulesof law. Nor is it equivalent to what might be called objectivemorality, the morality of popular opinion. It is not identicalwith compromise, and is not based on considerations of politicalexpediency.

What then is equity ? Equity, it appears, is the compoundof legal and semi-legal materials used to fill the gaps in inter-national law. It is based largely on analogy. This analogy is

EQUITY AS A COIqCEPT OF INwERNATiomAL LAW

to be drawn from legal science or jurisprudence as developed inclose connection with the actually existing and accepted rulesof international law. The scope of equity must not be toobroadly stated. It will not alter positive rules of internationallaw. Equity is not contrary to international law, but insteadfollows it to the extent of its existence. The theory is that in-ternational law is based in part at least on consent, and thiswould no longer be true if the tribunal could alter the rules.But while equity may not modify positive rules, it may fill thegaps in international law. International law is not regarded asa completely developed legal system, as are the private lawsystems of the leading nations of the world. As to many sub-jects of international relations there is no law at all. On otherquestions the law is but slightly developed or is very uncertainand obscure. It is the task of equity to make liossible solutionof such questions. Equity will make use of the existing rulesof law and out of them will seek to draw further principles. Itwill resort to anal6gies. But in the use of analogies it will becareful not to stride too rapidly. Analogies will be based onclosely related categories and not on unrelated fields of the law.As Mr. Justice Holmes says: "I recognize without hesitationthat judges do and must legislate .but they can only do sointerstitially, they are confined from molar to molecularmotions. "1 146

In one aspect equity in international law means morality.But it is a morality in close contact with existing rules of law.It is not simply a matter of generosity and sympathy andmercy. In selecting analogies and the other legal data to fill thegaps judges will inevitably be affected by ethical concepts. Butthe ethics will be those of a lawyer trained in the various fieldsof law and their bearing on one another, that is, the judg willnot allow considerations of morality to so dominate as violentlyto upset the qualities of certainty and predictability in the law.

In one sense it may be said that equity is a mode of applica-tion of the law rather than a source of law itself. ' That is, theinternational tribunal will apply international law equitably.147

"'S Sout£ern Pacific CJo. v. ;ensen (1917), 244 U, S. 205, " .........' The arbitrator "should take account of equity, of the ideas of

morality and justice which are found at the basis of intgraational law,in the interpretation which he believes should be giveii to the prin-ciples of this law." Weiss, Revue Generale de droit international pub-H~e (1910), 121.

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Equity is a quality which pervades or should pervade the wholefield of international law. Therefore to shut it off into a sepa-rate compartment is somewhat misleading.

Six or seven different meanings have been given to the wordequity as a general term of jurisprudence. It has been thoughtto mean simply analogy. It has been also identified with inter-pretation. Historically as far back as Aristotle it has been de-fined as reasonable modification of the letter of the law,especially of statutory law. In a somewhat broader sense it hasbeen used as a synonym of reasonableness or fairness in general.Thus it might modify both statutes and case law. In a fifthsense it has been used as equivalent to morality. In this senseit may mean the objective morality of public opinion or the sub-jective conscientious views of the judge. Occasionally it hasbeen used in the same sense as public utility. A few writers re-duce it to a mere compromise based on expediency. In inter-national law it would seem that equity may include the ideasof analogy, interpretation, reasonable modification of treaties,and reasonableness in general as to the application of bothcustomary and treaty law. When the application of these stillleave some doubt the tribunal may resort to morality. Thismorality will likely be the ethical views of the judges them-selves, as there is no mode of measuring objective publicmorality. Considerations of public utility and compromisewould seem to be excluded except as they coincided withmorality.

Finally in connection with the whole subject of equity ininternational law, one last word of skepticism seems necessary.Even when the arbitrator is empowered to decide simply accord-ing to international law, it seems that he is not barred from re-sort to analogy and to considerations of reasonableness andmorality. The international judicial process is not so utterlyunlike the process of a national court that the tribunal is to bedenied all creative functions. 148 An examination of inter-

"s "Moreover, it is not seen why, equity, which constitutes one ofthe bases of the positive municipal law of nations, should not also con-stitute one of the bases of international law, and be taken into con-sideration In a reasonable manner in the application of this latter law.Especially since in one of its acceptations, the law of nations is takenas synonymous with natural law, consecrating the principles of moral-ity and justice accepted by all peoples and opposing itself to the posi-tive law of the various states." Merignhac, L'Arbitrage International,

EQUITY AS A CONCEPT OP INTENATIONAL LAW

national awards shows that international law has been developedto a certain extent through them. Arbitral tribunals have pro-ceeded to fill the gaps in international law, although the com-promis have made no mention of equity. The judicial processof international tribunals is very similar irrespective of theterms of the compromis. The tribunal regards itself as boundto apply international law even if the arbitral agreement goe,%so far as to make "absolute equity" a basis, and even amiablecornpositeurs have been known to declare themselves bound byinternational law. It is doubtless true that an award may beregarded as invalid on account of an excess of power in not fol-lowing the legal bases set out in the compromis.149 But suchprocedure is comparatively so rare as hardly to merit considera-tion. 5o Where a nation fails to protest at once, the excess mustbe regarded as waived. The search and use of the sources bythe tribunal is not a highly conscious process. Too often it ismerely a disappointed agent who attacks the juridical characterof the award. It is much to be doubted whether nations haveattached much importance to the precise wording of the legalgrounds of decision. In fact private law judges in most nations

I

sec. 298. For analysis of the judicial process in municipal law courts,see Cardozo, The Nature of the Judicial Process; Gray, Nature andSources of the Law.

1 11In 1877 the Institute of International Law suggested fourgrounds for the nullity of an award: nullity of the compromis, excessof power, fraud of the arbitrators, and essential error. Annuaire del'Institut de droit International, I, 1877, p. 133. A failure to follow the

grounds of decision set out in the compromis is regarded as excess ofpower and possibly essential error. Lammasch, who has made a care-ful study of the subject, approves of only -two grounds for nullity, ex-cess of power and fraud of the arbitrators.

Die Lehre oton der Schiedsgerichtsbarkeit in ihrem ganzem Urn,fange, II, 221-222. Thus a failure to follow the prescribed legal baseswould be a ground of nullity under his view also. Perhaps the leadingexamples of awards Which were regarded as invalid for such a failurewas that in 1827 of the King of Netherlands as to the Maine Boun-dary and that in the original Orinoco Shipping Company case. In theformer the award drew an intermediate boundary line based on com-promise. In the latter the award was set aside by theHague Tribunalfor a failure to decide according to "absolute equity," as the compromishad prescribed.

1' Weiss asserts that the sanction of nullity of an award appliesparticularly -to a failure to follow the legal grounds set out in the com-promis, and that where equity is but one basis, especially a subsidiarybasis according to the compromis, the award is assailable. Revue Gen-erale de droit international public, 120-126. But Merignhac points outthat even cases of the' larger category-excess of power-have beenvery rare, and that the objection is more theoretical than practical.L'Arbitrage International, see. 331.

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are not formally bound to apply the law in any certain mode orin any certain order as to legal categories, and yet the resultsarrived at are generally satisfactory. It would seem impropertherefore unduly to emphasize the significance or the formalsources of law set out in the arbitral agreements. The suprem-acy of international law seems to be assured in most all cases

no matter what language is used.

V. GAPs iN INTERNATIONAL LAW.

One of the most mystifying problems of international lawis the existence of what are called "gaps" in the law.15 1 Thatsuch lacwnae exist is tacitly and often expressly recognized bypublicists. The compromis of arbitral agreements very seldomprovide for decisions according to international law exclusively,but generally provide for resort to other sources of law, suchas the principles of municipal law, the decisions of internationaland national tribunals, the opinions of authoritative writers,and principles of equity and justice. While the purpose of suchprovisions is perhaps in some instances to prevent a decisionaccording to strict principles of international law, and may inother cases represent mere redundancy of legal language, there

can be no doubt that on many occasions the parties have stipu-lated to such effect in order to avoid a non liquet, that is, a re-fusal of the tribunal to decide the case on account of the inade-quacy or obscurity of the law. Article 37 of the Hague Con-vention providing for awards by the Hague Tribunal "on thebasis of respect for law" instead of simply "on the basis oflaw" indicates that the framers viewea international law as anincomplete system. The Statute of the Permanent Court ofInternational Justice manifestly had this in mind when theyprescrfbed in Article 38 the following material law to be appliedby the Permanent Court:

"1. International conventions, whether general or particular,establishing rules expressly recognized by the contesting States;

"2. International custom, as evidence of a general practiceaccepted as law;

"3. The general principles of law recognized by civilized nations;"4. Subject to the provisions of Article 59, judicial decisions and

the teachings of the most highly qualified publicists of the variousnations, as subsidiary means for the determination of rules of law.

SThe German term for gap is "lucke," French and Italian,"lacune," and Latin, "lacuna."

EQUITY AS A CONCMT oF INTERNATiONAL LAw

"This provision shall not prejudice the power of the Court to decidea case ex aequo et bono, if the parties agree thereto."

The recent United States-British Arbitration Tribunalseems to have had gaps in view when they said that "even as-suming that there was . . . . no treaty and no specific ruleof international law formulated as the expression of a uni-versally recognized rule governing the case . . . it cannotbe said that there is no principle of international law applicable.International law, as well as domestic law, may not contain,and generally does not contain, express rules decisive of particu-lar cases; but the function of jurisprudence is to resolve theconflict of opposing rights and interests by applying, in defaultof any specific provision of law, the corollaries of general prin-ciples." 1r2

Kantorowicz, writing of the problem of gaps in any legalsystem points out that the word may be given an exceedinglybroad meaning. 53 "The fact that the construction of a statu-tory rule or the interpretation of a judicial opinion is dubious,is a proof that a logically stringent decision is impossible; andthe assertion that the case before the court is 'similar' to a cer-tain precedent, generally implies a subjective evaluation thatthe differences between the two cases are insignificant and an ad-mission that there is no established rule governing the ease inquestion in its full individuality. So the lawyer is, in fact, al-ways faced with the 'gaps' in the law and this demonstrates theimportance of the gap problem."

There are, in the view of Kantorwicz, two opposing ten-dencies in the law; the formalistic, which applies the law exactlyas it has developed historically; and the purposive or produc-tive, which has prevailed in the Anglo-American legal systemin practice though not in theory, and which uses the law as ameans to the end of controlling life in its shifting facts.154

The former school adopts the Geschlossenheitstheorie, that lawis a closed system free of gaps. The latter school should regardformal law as subject to gaps (the Luckentheorie). The theoryof the Anglo-American legal system has been obscured, however,because the lawyers have "considered law as a closed system

'"Nielsen's Report, 73, Eastern Extension, Australasia and ChinaTelegraph Co., Ltd.

28 Columbia Law Review, 679, 698-699.I Tbid., 699-701.

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and therefore believed that they had to disguise their ownjuristic and judicial creations as mere applications of the law."'Gaps are of two types: material, where the rule of law itself islacking; and, textual, where only an adequate textual expressionof the purpose of the law is laeking.155 The textual gaps, or asZitelmaun calls them, the "apparent" gaps are caused by thefact that the purpose of the statute is broader than its meaning,as where the word "man" is used to include both men andwomen. The textual gaps must be filled by "free interpreta-tion," based on the purpose of the statute, as tested by its socialeffect if it were adopted at the time of the controversy."Material" gaps exist both in code and case-law systems.'5 6

"The material gaps have to be filled up by different forms ofthe free law, the order of which is determined in part by positiverules, in part by considerations of legal philosophy." ArticleI of the Swiss Code lays down a specific order. In the absence ofpositive rules the following order is suggested: formal explicitlaw, formal implicit law, nascent explicit law, nascent implicitlaw, desired explicit law, and desired implicit law. Three im-portant mistakes in filling the gaps are suggested.157 In thefirst place the court may apply "one alone out of several equallypossible interpretations as the only one to fill up the gap." Inthe second place, it may act "in pretended accordance with thewhole system, but without regard to the peculiarity of the prob-lem or case in question." Thirdly, it may err "by an unsuitabletransference of a concept from a technically well developedbranch to a less developed one. In the first instance we havethe systematical, in the second the pseudo-systematical, in thethird the cross-selective (grenzverwirrende) type of legal con-ceptualism."

Kiss also ascribes a broad meaning of the term as one ofjurisprudence.158 He asserts that "the specific facts in indi-vidual cases produce 'gaps' in every legislative provision. "u 5Gaps are not limited to technical errors in drafting statutes,obvious mistakes on the part of the legislator, or important

-Ibid., 701-702.' Ibid., 705-706.

7 cience of Legal Method, 146, 158-162, "Equity and Law: JudicialFreedom of Decision, 146, 158-162.

Ibid., 159.'-' Ibid., 160.

EQUITY AS A CONCEPT OP INTENATiONAL LAW

changes in economical and social conditions. It "is not possibleto draw a sharp distinction between statutes that provide forall cases and those that contain 'gaps'. The line is altogethervague." 160 The general framework of the statute is to be filledin by interpretation, that is, by carrying out the principles ofthe statute.'0 1 The court is to supply what the statutes omit,but always through interpretation. In the case of statutes thereare 'gaps' in a narrow and technical sense when there is a lackof detailed, abstract rules by which a submitted case may bedecided. In the view of Kiss it seems that gaps are confined tostatutory law.

The views of the two writers as just stated are from thepoint of view of law in general. One of the most recent con-siderations from the point of view of international law is thatof Verdross.'0 2 The expression "gap in the law" is ambiguous

Ibid., 161-162.""Die Verlassung der Volkerrechtsgemeinschaft, sec. 19, pp. 69-75.""Ibid, 72. Most of the publicists seem inclined -to reject the pos-

sibility of a non liquet in international law. By the term seems to bemeant a refusal of a court to decide a case on account of the obscurityor inadequacy of the law. Article 4 of the French Civil Code, requiresthe national courts to decide in all cases. The subject was discussed bythe Advisory Committee of Jurists which drew up the World CourtStatute. Hagerup was of the view that to avoid the possibility of anon liquet, the court must not be allowed to dismiss the case, for wantof a material applicable rule. Hence, he favored the joint Scandi-navian project submitted to the Committee allowing the court to resortto general principles of law and even to decide according to what itthought ought to be the law. Advisory Committee of Jurists, Perma-nent Court of International Justice, Proces Verbeaux, 286. Root in-sisted that if the court were given compulsory jurisdiction, in caseswhere there was no applicable law, it should dismiss' the case, or con-fine itself to making a recommendation. If the court's jurisdiction wasto be voluntary, however, he had no objection to the application of sub-jective conceptions of justice in such cases. Ibid., 308-323. Descampsdenied that the absence of treaty or customary law meant that thecourt could not decide. Loder pointed out that the Dutch law did notpermit a non liquet, and that the same principle could apply in inter-national law. De Lapradelle, like Loder, could not conceive- of a no nliquet. Ricci-Busatti defended Root's position, urging that what is notforbidden is allowed. Hence, if a claimant state can point to no legalrule in its favor, the court need simply declare the absence of a mate-rial applicable rule and thereby establish the legal situation. Hagerupwas willing to accept this position if the English system of judge-madelaw were taken over, so that the court might resort to analogies andprecedents. Lord Phillimore pointed out that in private cases wherethe plaintiff had merely a right of a moral order, the case must be dis-missed in the absence of positive law in support of his claim. The gapsin international law should be filled through legislation by the Assem-bly of the League, or by reference of the dispute to the Council. Heasserted that Root's view based on the Anglo-American demurrer.On the whole, it seems best to conclude that an international court can-

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and equivocal. In a broad sense it may mean that internationallaw does not fulfill the needs of international society. But toregard international law as wanting in this respect, one musthave in mind an ideal law of which existing law is only a part.But this, in the view of Verdross, is only a "political" gap.In the second place, by the existence of gaps in international lawmay be meant that not all international disputes may be settledby reference to international law. In the third place it may meanthat a non liquet has been provided for. As to the second mean-ing suggested, Verdross points oat that not all cases can besolved on the basis of the immediately applicable rules, andthat a partial resort to analogy is necessary. If we call suchgaps "legal" gaps, the modern penal code is free from thesegaps, since in accord with the maxim nulum crimen sine legean analogous carrying over of the criminal facts is excluded,so that each case on the basis of these rules must lead to a sen-tence or an acquittal. The modern civil codes have "legal"gaps, however, since in some cases an analogous application oftheir directly applicable rules is necessary. But this hiatus isnot based on a defect in the legal system, but rather on its full-ness, and it is the design of the legal system to refer thejudge to analogy. That is, the judge resorts to analogy not be-cause the case could not otherwise be decided, but because thelaw desires in certain cases not a strict but an analogous appli-ation of the directly applicable rules. In fact if the legalsystem failed to direct any resort to analogy, all legal claims notfounded on the applicable rules would be rejected, so that nolegal gaps would exist. The "legal" gap is thus created in thefirst instance by the design of the legal system not to place allcases under the directly applicable rules, but to make use ofstatutory and legal analogy when a strict application of theserules would violate the spirit of the legal system.

The third possible meaning above mentioned is that the

not dismiss a case on account of the obscurity of the law, as it is thefunction of a court to resolve the obscurity. Even when the law isclear but inadequate, it would seem that the technical rules of de-murrer would not apply in international cases. On the other hand, themere resort by a claimant state to adjudication is not in itself evidencethat it has a valid claim. The decision of the Permanent Court of Iu-ternational Justice in the Lotus case seems to indicate that a nationmust be able to point to some established principle to support its claim.P. C. J. L Publ., Series A, No, 10.

EQurry AS A CONCEPT OF INTERNATIONAL LAw

judge is not in position to decide certain cases, so that the con-troversy has to suspend with a non liquet.168 Such a gapis termed by Verdoss an "application" gap. Such a gap mayarise out of the nature of the legal system, as when the judge isdirected not to decide under all circumstances, but under fixedhypotheses to pronounce a non liquet, and to leave the decisionto another as the law giver. Hence these "application" gapsform no gaps in the legal system. They arise not because thejudge cannot decide the case, but because it is the design of thelegal system that it shall not be resolved by him. Such a casearises in international law when an arbitral agreement on theone hand empowers the tribunal to decide on the basis of set-tled rules, and on the other hand expressly or tacitly forbids therejection of those claims which cannot be founded on theseprinciples. 164 In such cases the settlement is left to themutual understanding of the parties. Real "application" gapsexist when the law contains a principle governing the case atissue, but such principle is too uncertain to be capable of appli-cation to the extent that the legal system furnishes no authorityto resort to analogy or free discretion. "Since in this case, atechnical flaw in the legal order is involved, these 'application'gaps may be called 'technical' gaps."

A legal system may intentionally exclude certain cases.Thus from this point of view the legal system contains gaps onlyto the extent that it wishes to do so. Such gaps are not unwilledgaps. No matter how incomplete the legal system viewed fromthis apart, a decision is always possible, all claims not foundedon principles of law, not being recognized as existing in law.The theoretical controversy depends on whether the legal sys-tem asserts the claim to regulate all cases, or whether it under-takes not to lay down principles for certain cases. Under theformer state of facts the legal system is, aside from the techni-cal gaps, free from gaps despite all its deficiencies. But evenunder the latter assumption, the gaps are not clefts in the legalsystem, but only a figurative expression for the subjects not en-compassed within the area of rules of law. Disputes over theissues could be settled by the application of international law,

Ibid., 72-73.2 A. J. L L. 313, 335, "The Science of International Law: Its

Task and Method."

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but the parties have forbidden it. The "rechtsleere Raum"

does not emerge until the. parties have limited themselves. Incases before the World Court the third clause of Article 38 willprovide for "technical" and "legal" gaps.

Oppenheim assumes the existence of gaps in internationallaw, but is not explicit as to what is their nature.165 "It is notthe task of the writer to fill in the gaps in the existing rules of

international law unless a conclusion per analogiam suggestsitself with such force that its acceptance is obvious and abso-lutely necessary. Of course, the gaps must be brought into view,and the writer may offer an opinion de lege ferenda, how to fill

them in." The English common law judges fill in gaps in Muni-cipal law with case law. "Do they not fill in the gaps of the lawwith new law which they find per analogiam ?" 160

Lammasch, in his excellent analysis of the arbitral process,

has studied the problem of gaps and the methods of filling

them.16 7 His concept is much like the "legal" and "technical"gaps referred to by Verdross. "In many cases a completely ap-plicable and indisputable legal basis for the legal conception of

the arbitral tribunal will be lacking. Positive international lawhas not been developed for a very long time; hence in some casesit can give to questions which come up only a partly certain

answer. The gaps in international law are all too many.''108

Under such a state of facts the arbitral tribunal may not apply

the local law of one of the parties- unless both parties agree

thereto. Just as the arbitrator must apply international lawwhen a rule exists, so in the case of a gap, he may not fill it ac-cording to his individual legal conviction. He should applyrules in the spirit of existing international law. It is the taskof jurisprudence to develop the rules where gaps exist. Butsuch jurisprudence is not to act on the mere personal opinion of

jurists, but on a legal science operating in close unity with posi-

tive law. In such cases, in which positive rules of international

law are lacking, it is legal analogy, and scientific development

-& Ibid., 337..lrDie Rechtskraft Internationa~er Schiedsspruohe, 43-48.1Ibid,, 43-44.

" Ibid.; 47.

EQUITY AS A CONCEPT O V INTERNATIONAL L&W

which must form the basis of the award." 169 This in the viewof Lammaseh is what is meant by a resort to equity. 170

Alvarez suggests that there 're three kinds of gaps in in-ternational law.17 1 The simplest type is of a case which has

not been foreseen, but of a nature identical or similar to that ofother cases which have been foreseen. Such a gap is to be filledby the application of general principles of law, especially byresort to analogy. But caution must be used in applying privatelaw analogies. The second sort of gaps is "a wholly new caseinvolving the appearance of a new relation due to social andeconomic changes." To fill this gap reedurse must be had "tothe principles of law, and in their absence to those of justice andequity, the solution most conformable to their nature mustbe found according to these later principles: otherwise, the de-velopment of the law would be impeded." The third type ofgap is a case arising out of "the special situation of a continentand which has not been foreseen." That is, there might be a gapin international law as relates to South America. This gap is tobe filled like the second type.

Enrich has also given some attention to the problem ofgaps. 172 He contends that on account of the incompleteness andgaps in international law, arbitrators cannot decide wholly ac-cording to strict law. "An international arbitral tribunal to besure cannot decide contrary to recognized principles of interna-tional law, but when the present materials of development ofinternational law and its numerous gaps are brought in view,the claim cannot be unopposedly maintained that the decisionsof international arbitral tribunals must be based exclusively onjus stricturn.173 Writing before the Permanent Court of Inter-national Justice was established, Enrich maintains that a worldcourt should have the right to decide according to justice andequity, because under present world conditions it is impossibleto have such a court decide only according to "recognized rulesof international law.' 74 He seems to be of the view that a gap

SIbid., 48.o La Oodification Du- Droit International, 162-164.

2 7Problemn der internationalen Organisation, 3-9.Ir bid., 3-4.

lUIbid., 5.I74 bid., 7.

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is a considerably broader hiatus in the law than a mere defectwhich can be cured by a resort to analogy. The internationaljudge exercises two functions: finding the law and the use offree discretion (das freie Ermessen).175 The problem of freediscretion of the judge is closely connected with that of findingthe law. "The discretion of the judge which here has a widefield to act in and which often will be of decisive significancecannot be unquestionably identified with his 'law-finding' func-tion in connection with questions of the kind mentioned here;in the first place it is less a matter of filling the gaps in thelaw, than ascertaining the facts and applying the right consid-eration to them.''176

When all is said and done, it seems that the problem ofgaps in international law is not wholly dissimilar from that inprivate law. If it be asserted that the failure of internationallaw to meet the needs of international relations proves that itcontains gaps, manifestly gaps must be said to exist in privatelaw since there is no one who concedes that the legal system ofany country fully meets its needs. The common law is con-stantly being altered by judicial decisions while the Continentalcodes acquire new meaning through interpretation and the pass-age of new laws. The existence of political questions in interna-tional law does not necessarily indicate that there are lacunaein the law, inasmuch as it is the deliberate will of the nationsthemselves that certain questions be regarded as political. It issubmitted that practically every dispute that might arise can besettled according to legal principles if the parties actually desirea legal adjustment. While it is true that international law is

-'I bid., 9.170 The following are suggested as a bibliography on the gaps in in-

ternational law: Alvarez, La Codification Du Droit International(1912), 162-164; Cavaglieri, Lo stato di necessita nel diritto interna-zionale (1918) 104-118; Donati, I Vroblema delle 7acune dell' ordina-mento giuridico, (1910); Ehrlich, Lucken im Recht; Erich, Probemeder internationalen Organisation, (1914), 1-10; Heilborn, Grundbegriffe,33 et seq.; Kantorowicz, 28 Columbia Law Review 679, 699-706, (1928);Kiss, Science of Legal Method, 158-162, "Equity and Law: JudicialFreedom of Decision;" Lammasch, Die Rechtskraft InternationalerBchiedsspruche, 43-48; Oppenheim, 2 A. J. I. L. 313 (1908), "The Scienceof International Law: Its Task and Method;" Redslob, Das Problem desVolcerrechts, (1917) 241, 315 et seq.; Somlo, #tfristische Grundehre(1917); Strisower, Die Krieg und die Volkerrecht, 62 et seq.; Trendel-enburg, Lucken im Volkerrecht, (1870); Verdross, Die Verfassung derVo lkerrechtsgemeinschaft (1926), see. 19; Zitelmann, Lucaen imr Recht(1903); Zitelmann, Die Unvoflkommenheit des Volkerrechts, (1919).

EQur=Y AS A CONCEPT OF INTEENAToNAL LAW

in its infancy, yet the armory of legal norms is full enough tomake possible the adjudication of most controversies accordingto law. It is moreover a notable fact that even well developedprivate law systems such as that of the United States, have theircategories of political questions of which the national courtscannot take jurisdiction. The Supreme Court of the UnitedStates leaves to the political department such questions as theexistence within a state of the Union of a republican form ofgovernment, and the recognition of foreign states. If the twodefects suggested, that of the failure of international law fullyto meet the needs of the family of nations, and of the existenceof political questions be considered as gaps, it seems that theymust be filled in by international legislation, and not by judicialdecision.

A gap in the legal sense, one must conclude is the non-existence or the obscurity of detailed rules for the settlement ofconcrete cases. The international jurist must become consciousof such gaps, not, however, by resort to his individual subjectiveattitude towards a given problem of international relations, butby bringing to bear his trained legal point of view, so as tobecome aware that the problem admits of solution by resort toanalogy and interpretation. Otherwise there would be chaos inworld adjudication, since a claimant nation would readily finda gap in the law, based on its desire for relief. Gaps of thiskind may exist both in treaties and in customary law. The in-ternational tribunal has the right to bring about a solution bya resort to analogy. That is, it may look to the existing legalprinciples which in logic and reason seem more directly to bearon the problem and draw from them a new rule. Perhaps sev-eral analogies will occur to the tribunal, and at this stage thecourt will be led to examine considerations of equity. This ex-amination will result in the courts having to consider questionsof reasonableness and morality and international sociology.Thus even at this date natural law with, however, a changingcontent may still play a part in the law of nations. It may bethat because of the inequality in the strength of the differentnations and because of the infancy of international law that

140 KENTUoKY LAw JounNAL

considerations of morahty operate within a more limited scopein international adjudication, but that equity must still play apart cannot successfully be denied.

LEsE.ER BE aHARDT ORm.LED.Lincoln, Nebraska.